Hawthorne Gold's Gym set to close in May still owes city $2M

Gold's Gym in Hawthorne will close next month, even though it still owes the city more than $2 million.

The gym opened just five years ago with unparalleled city support - namely, a $2.5 million low-interest federal loan rarely awarded to for-profit businesses.

The city offered the loan in hopes the gym - on West 147th Street in the southern part of town near Lawndale - would improve a rundown part of the city and employ low-income residents.

Terms of the loan required the independently owned and operated gym to hire 40 locals who had difficult economic conditions.

"The main idea was that it would create a certain amount of jobs," City Attorney Russ Miyahara said. "But, at that time, we had a lot of people coming out against it."

The loan was controversial among city leaders, and led to political rifts and accusations of favoritism and pay-to-play politics for years. In fact, the gym was controversial even before the City Council approved its development plans in 2004. Lawndale sued Hawthorne, claiming the gym would cause traffic backups in its community. A former Hawthorne planning commissioner also appealed the gym's plans, arguing that it didn't deserve special treatment.

Former Councilman Gary Parsons voted for the gym loan, but said he was so concerned about it that he saved all the documentation on the deal in case it was ever contested.

"I had severe reservations if this was a really good deal for the city," Parsons said. "But, in that era, getting a Starbucks in Hawthorne was a big deal. Getting Gold's Gym was a big deal. It helped to turn around Hawthorne. That's when we got the new Costco, Bed, Bath & Beyond, South Bay Ford, Lowe's - it was a renaissance era."

Despite uncertainties, the city went forward with the plan and the 33,000-square-foot, 24-hour gym did well for about two years after it opened. Gym representatives have blamed the nationwide economic recession in 2008 for large membership declines and subsequent financial losses.

This year, the gym stopped repaying its loan to the city and declared bankruptcy. Gym owners also stopped paying rent on its lease when the landlord refused to reduce their rent. Through an ongoing - and slowly moving - bankruptcy case in U.S. Bankruptcy Court, the landlord has agreed to forgive $500,000 in back rent and pay more than $200,000 in concessions if the gym moves. The gym is set to close on May 1.

Gym attorney Robert Yaspan said the owners plan to open another Gold's location in a nearby city in the fall. Current memberships will be transferred to the Redondo Beach location for now, he said.

It is not yet clear whether the city will recover the loan money it invested in the gym. In the meantime, the city must cover the gym's loan payments with public funds.

Mayor Danny Juarez said he does not believe the money will ever be repaid. He has argued for years that the loan was a bad idea and only approved because of former Mayor Larry Guidi's personal relationship with the gym's owner.

"The loan should have never taken place," Juarez said. "It doesn't appear that that loan will be repaid by Gold's Gym to the city. But every year we have to make that $250,000 payment. We could be using that money for something else. I'm extremely disappointed that we're getting screwed in this deal."

Guidi, who strongly supported the gym, said the loan was handled by staff, and was not a result of his friendship with the gym owner.

"Isn't it sad that these are people elected by the city of Hawthorne and they're just `anti' anything good that I brought into the city?" Guidi said. "We need to find a way to be business friendly again."

Though the city's relationship with Gold's Gym in Hawthorne began with generosity and hopefulness, it has soured. The current City Council majority is frustrated by the gym's performance. For their part, gym owners are equally dismayed with city leadership.

"We have a hostile City Council and mayor," Yaspan said. "The mayor used us as a pingpong ball in the last election. There are neighboring communities that just want to have another employer so the gym is moving."

Sam Robinson, a Gold's Gym member, said he was disappointed to learn the Hawthorne location is closing.

"You'd think they would tell people they're closing," said Robinson, who lives in Santa Monica but works across the street. "I'm used to being able to walk across the street to work out."

The gym issued a letter to members that was available at the front desk, assuring them that a new location will soon open nearby.

Before her workout last week, gym member Margarita Caceres said she was skeptical another location would open, and sad that the gym was closing. She said the nearby LA Fitness is too crowded and not as well maintained as Gold's Gym, which has new equipment, a large pool and comfortable classrooms.

"It's like a family here," Caceres said. "We all know each other. We like it here."